Comments on: Earnings Power Value EPV and Book Review

By: What’s going on at OSV | Old School Value

What’s going on at OSV | Old School Value — Fri, 25 Sep 2009 17:10:37 +0000

[...] upgrading the stock value calculator spreadsheet which has been modified to include a fully working earnings power value calculator as illustrated by the Microsoft EPV [...]

By: Jay

Jay — Fri, 25 Sep 2009 04:57:54 +0000

Excellent write up, Jae! I picked up this book about 6 months ago and am about half way through reading it. It is most definitely a book that you need to sit down with a pen and paper to truly understand.

By: Earnings Power Value EPV Valuation Microsoft | Old School Value

Earnings Power Value EPV Valuation Microsoft | Old School Value — Mon, 21 Sep 2009 10:07:48 +0000

[...] a lot of my time for the past 3 weeks dissecting and reverse engineering Bruce Greenwald’s earnings power value EPV method and it’s time I performed a stock value calculation based on [...]

By: Maintenance Capex Calculation Bruce Greenwald Method | Old School Value

Maintenance Capex Calculation Bruce Greenwald Method | Old School Value — Fri, 18 Sep 2009 16:42:17 +0000

[...] Since depreciation can be misleading, you may be missing out on opportunities by unknowingly using a unrealistically high number for maintenance capex calculations. This is where Bruce Greenwald’s method of calculating maintenance capex makes a lot of sense. Calculate the ratio of PPE to sales for each of the five prior years and find the average. We use this to indicate the dollars of PPE it takes to support each dollar of sales. We then multiply this ratio by the growth (or decrease) in sales dollars the company has achieved in the current year. The result of that calculation is growth capex. We then subtract it from total capex to arrive at maintenance capex. – pg96 of Bruce Greenwald’s EPV book. [...]

By: Jim

Jim — Tue, 08 Sep 2009 22:32:33 +0000

Jae, pick up a copy of Greenwald’s other book “competition demystified”. I’m on my 3rd read. Its a very complex book and I wouldn’t recommend it to a new or relatively new analysts because of its complexities but it is a fantastic read. Its my 3rd read and its taken than many times to understand it and I’m sure I’ll read it a few more times. Basically, its a condensed version of Michael Porter’s works. Condensed in terms of being more concentrated for the value investor rather than a macro economist.
Jim´s last blog ..Axcelis Tech. Update

By: Jae Jun

Jae Jun — Tue, 08 Sep 2009 21:13:26 +0000

@ Todd,

When I read the middle section alone, it’s about a 100 pages or less so it didn’t take long to read. I go through it on the plane to NY with lots of naps in between.

By: Jae Jun

Jae Jun — Tue, 08 Sep 2009 21:11:39 +0000

@ Floris,

The upcoming spreadsheet in October will include a tab that allows you to adjust and value the assets, including long term assets and fixed assets.

A more modernized and flexible method.

By: Todd @ Personal Finance Playbook

Todd @ Personal Finance Playbook — Tue, 08 Sep 2009 18:34:04 +0000

I starting reading this book two years ago, got half way through it, put it down and never got back to it. I saw it on my shelf the other day. I’m looking forward to reading it, though I’m going to check out at least one of the books you recommended that are a bit more elementary. Thanks for the post.

By: Floris

Floris — Tue, 08 Sep 2009 14:12:03 +0000

@Jae Jun

Yes, he does. He especially takes into account long term assets that can easily be liquidated (prime real estate). The standard NCAV formula completely ignores real estate which has become much more liquid since the formula was first devised (at least until this crisis, but let’s assumes it will revert to the mean).

By: Floris

Floris — Tue, 08 Sep 2009 14:06:27 +0000

Hey Jim,

I know he is quite respected (just look at the class recordings available at the schloss archive) and I will read his book. Call it availability bias that I ignored his book for this long.